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Mr. Quentin Davies (Grantham and Stamford) (Con): The hon. Member for Newport, East (Jessica Morden) gave an extremely attractive maiden speech that was very competently delivered. We learned a lot about Newport—or I certainly did, as I did not know much about it before. Many Members on both sides of the House will appreciate the hon. Lady's kind words of tribute to her predecessor, Alan Howarth. It was a model of a maiden speech that augurs well for a new parliamentary career, and I know that we would all want to welcome her to that.
My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) made an extremely well informed speech about the Bill that made me feel that I should try once again to get on to the Finance Bill Committee, because it sounds as though we will have some interesting subjects to discuss. Clearly, he could not give such a thorough account of the Bill's strengths and weaknesses and at the same time say much about macro-economics. However, that does not mean that there is not a lot that needs to be said about macro-economics, not least because the Government—I am afraid that the Paymaster General is very much in the model of her boss in this matter—continue to take a consistently self-righteous, self-congratulatory and complacent tone in everything that they say on the subject.
That is disgracefully reflected in the way in which the Red Book is drafted. The Red Book used to be regarded as something that was drafted as dispassionately as possible from a party political point of view by Treasury officials, but—I said this last year but I shall say it again as it remains true—it has increasingly become a work of political propaganda in which everything that happened before 1997 was terrible and everything that has happened since is absolutely brilliant. It is extremely difficult to find some of the essential facts that one needs because those facts, which are not flattering to the Government's performance, and any problems are skated over.
Against that background, it is important to use this debate to redress the balance—albeit slightly, because that is all that one can do in a very short space of time.
Helen Goodman (Bishop Auckland) (Lab): My recollection, having been a Treasury civil servant throughout the Tory years, is that Tory Ministers were greatly interested in the drafting of the Red Book. Does not the hon. Gentleman recall that when Nigel Lawson was Chancellor of the Exchequer he personally decided that we should introduce into it the medium-term financial strategy? That was a direct ministerial intervention that was not in any way initiated by officials.
Mr. Davies:
No, the hon. Lady must be quite wrong about that. I remember Lord Lawson, as he now is, was Chancellor of the Exchequer when I entered the House, and the medium-term financial strategy, which he had devised as a junior Treasury Minister long before I entered the House, was the framework for economic policy at that time—a very successful framework. It would therefore have been extraordinary to have drafted the Red Book
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without making reference to the medium-term strategy—rather like drafting the Red Book now without reference to the golden rule or the sustainable investment rule, and I certainly do not protest that those two things are dealt with in the Red Book.
Mr. Richard Spring (West Suffolk) (Con): I do not recall Lord Lawson double and treble-counting the figures for the first two or three years when he was Chancellor of the Exchequer, unlike the present incumbent.
Mr. Davies: I think that standards in these matters have slipped and eroded, which is unfortunate. Were we to go back to the time of Sir Stafford Cripps, we would find that he adopted a more severe approach—not a more successful approach to the management of the economy—to the presentation of the facts in the documents produced in the Treasury.
A lot is right about the economy: of course, it has been doing well, although not so well since 1997, in terms of growth, as between 1992 and 1997—one would not learn that from reading the Red Book, but it is a fact. Nevertheless, the British economy has some favourable aspects currently, but also some worrying features, which also need to be discussed and addressed. I want the Government to be reminded of them and forced from time to time to address them.
First, the Chancellor is showing increasing signs of losing control of public expenditure. Those are strong words, but let us examine public expenditure as a proportion of GDP. In 1997, when this Government took office, public expenditure stood at 39 per cent. of GDP. It then fell, because, as we all know, the Chancellor continued with Conservative projections for the growth of public spending in the first two years, to 37.3 per cent. of GDP in 1999–2000. That was a favourable fall. It has now risen to 41 per cent. of GDP, and is projected to rise to 42 per cent. next year. That is a rise of five percentage points in five years, which is quite worrying. What will he do for an encore? Will it rise another five per cent. in another five years, which will be a rise of 10 per cent. over 10 years? It cannot continue rising indefinitely or we will have a major economic headache. The Government should address that sort of issue, and not try to bury it. Incidentally, I did not get those figures from the Red Book; I had to find them elsewhere, as they are not in it—I wonder why.
Rob Marris: May I refer the hon. Gentleman to the table on page 275 of the Red Book, which gives those figures? It also shows that in 1982–83, the figure was 42.7 per cent., in 1983–84, 42.3 per cent., in 1984–85, 42.6 per cent., in 1985–86, 41 per cent., and in 1986–87, 40 per cent. Need I go on?
Mr. Davies: The hon. Gentleman is partially correct, but I repeat my point: curiously, those figures do not go up to last year. Therefore, he will look in vain in the Red Book for the figures that I quoted for the previous year, 2004–05, and the estimate for next year, 2005–06, of 41 per cent. or 42 per cent. They are not there, and I wonder why, as the House of Commons Library was able to find them for me based on the Treasury's figures.
Rob Marris:
Will the hon. Gentleman give way?
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Mr. Davies: I will proceed for a little longer before I give way again. I will no doubt do so later, but I do not want the whole of my speech to be taken up by the hon. Gentleman, who, I am sure, Mr. Deputy Speaker, will be able to catch your eye in due time.
Secondly, the Government are losing control over the current budget deficit, about which the Government's projections have been proved wrong successively. I will quote from the Red Book, for those who do not want to read it, to give the flavour of the complacent and potentially deceptive way in which it is sometimes drafted. Paragraph 2.39, on page 27, states
"The estimated 2004–05 outturn for public sector net borrowing is £34.4 billion, compared with £34.2 billion projected in the 2004 Pre-Budget Report"
Those figures seem very close. Anyone reading that would say "It is fine. Everything is under control. The outcome is almost exactly what was predicted six months ago and a year ago." Let me read on, however.
"For the public sector current budget, the estimated 2004–05 outturn shows a deficit of £16.1 billion compared with projected deficits of £12.5 billion and £10.5 billion in the 2004 Pre-Budget Report and Budget 2004 respectively."
In other words, over the last six months the Treasury's prediction of the current deficit has risen from £12.5 billion to £16.1 billion, and over a year it has risen from £10.5 billion to £16.1 billion. That means that in six months there has been an increase of a third in the estimated outturn for the deficit, and over the last year an increase of a good deal more than 50 per cent.
All well-run businesses make forecasts. If a business's forecast was found to be out by a factor of 50 per cent. every year, questions would be asked and answers required. There is no doubt that there is a series of instances of the Treasury's missing its forecast.
Rob Marris: Will the hon. Gentleman give way?
Mr. Davies: I will not give way to the hon. Gentleman again immediately. He will have to be patient. I will develop my argument, if I may.
The other curious aspect is this. How is it possible, within the general figure for the Government's deficit—which is roughly the same as that predicted a year ago and in November—for the current deficit to have increased so much? The answer must be that investment spending has been cut. The Government have said "My goodness, it will be terribly embarrassing if we breach our forecasts, and the budget deficit is much greater than was anticipated only six months ago. Since the current element of the budget is out of control, we will have to compensate by cutting investment spending." I think that that is confirmed in the table on page 30 of the Red Book:
The Chancellor is doing something that he always said he would never do. He is doing something that he accuses previous Governments, Labour and Conservative, of doing: playing around with investment spending, and using it as a cushion to absorb mistakes made in the management of current
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spending. Again, I fear that the full story is not clear. It is certainly not clear from the Red Book. If the Paymaster General wishes to intervene, I shall certainly give way. I hope that she will have an explanation for the House in due course. [Interruption.] The Paymaster General's sedentary intervention may have been very significant, and the House would probably like to know what it was, but I did not hear it.
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